Christmas chocolate prices soar while cocoa farmers struggle

Grocery shopping this Christmas season may bring some relief compared to recent years, as falling food inflation in many countries helps ease the strain on holiday budgets. Except, that is, for chocolate!

As consumers in Germany rush to stock up for the holidays, local media reported this week that they are paying nearly 50% more for the Kinder Chocolate Santa Claus. Even before the Christmas shopping dash got underway, the UK's consumer association Which? warned that prices for some bars and luxury chocolate gift boxes had almost doubled across Britain.

One French chocolate producer, meanwhile, told regional daily Ouest France recently that they are now paying up to €12,000 ($12,700) per metric ton of cocoa — the main ingredient in chocolate — compared to €3,000 a year ago.

Chocoholics' worst nightmare

It seems the world is in the grip of a major bout of choc-flation and, according to some commodity traders, it's going to get much worse.

At the heart of the issue is a major shortage of cocoa, after a catastrophic harvest in West Africa caused by cacao swollen shoot virus (CCSV), which spreads from tree to tree and can cause a 50% reduction in crop yields over as little as two years.

A wetter-than-usual rainy season as a result of the El Nino weather phenomenon and fertilizer shortages, exacerbated by Russia's invasion of Ukraine — which disrupted exports through the Black Sea — are other contributory factors, alongside climate change.

Cocoa futures on London's Intercontinental Exchange (ICE) were last week trading at 8,363 UK pounds ($10,671, €10,136) per metric ton, a five-fold price increase on December 2022 and a near-tripling over the past twelve months.

"The most recent rally has been due to concerns that Ivory Coast and Ghana mid-crops may underperform expectations, reducing the potential production surplus in 2024/25," Steve Wateridge, head of Softs (soft commodities) research at the London-based Tropical Research Services, told DW.

Cocoa tree virus a 'disaster' for farmers

Wateridge described CCSV as a "disaster," adding that "little seems to be being done to control the spread in Ivory Coast and Ghana so the situation will only get worse going forward."

Michele Nardella, director of the economics and statistics division at the International Cocoa Organization (ICCO), thinks it is now vital to step up sustainability programs among producers in Africa to improve agricultural practices.

"Smallholder farmers are not necessarily aware of [CCSV's] impact on yields and may not know what practices to adopt to contain them," Nardella, who is based in Abidjan, told DW. "They may be reluctant to uproot them [cocoa trees] simply because cocoa is their only source of income."

Writing recently in the Financial Times business daily, Pierre Andurand, founder and chief investment officer of Andurand Capital Management, warned of a "multiyear structural supply-demand deficit in cocoa beans," and that "much higher prices are coming."

Andurand said global cocoa output had already fallen by 13% in the 2023-24 season, noting how European and US stockpiles of cocoa pods are at 25% of their December 2023 level — the lowest on record.

Other cocoa price watchers, like the Association of the German Confectionery Industry (BDSI), which represents the interests of more than 200 confectionary producers, are concerned the output figures may be "unreliable."

"There are conflicting figures regarding the entire harvest in West Africa. While some estimates suggest declines, the arrival of deliveries from the farms to the ports, a very important indicator, has increased considerably compared to the same period last year," BDSI told DW in a written statement.

Germany's Federal Ministry for Economic Cooperation and Development (BMZ) estimates that for every euro spent on a chocolate bar, only around seven cents go to cocoa farmers, while manufacturers and traders receive around 80 cents.

Ghana sweetens deal for cocoa farmers

Farmers in Ghana, the world's second-largest cocoa producer after Ivory Coast, began hoarding their beans in anticipation of higher prices, which added to the supply shortage.

The Ghanaian government last month announced a nearly 50% increase in the amount paid to farmers, hoping to deter hoarding and smuggling to neighboring countries that offer higher prices. Last season, Ghana lost more than a third of its cocoa output to smuggling, according to Cocobod, the country's cocoa board.

So far, the price squeeze has had a limited impact on demand. In Germany, per capita chocolate consumption rose from just over 9 kilograms (19.8 pounds) in 2018 to almost 9.9 kilos in 2023, according to BDSI. Separate data from market research firm NIQ suggests chocolate sales are down 1.3% over the past 12 months.

Chocolate sales in the United States fell 5.5% in the year to June, according to the Chigago-based research house Circana, although that doesn't include this year's busy holiday season.

Alternatives could take years to bear fruit

Competitors are, meanwhile, waiting to ramp up production if cocoa crop yields continue to plummet in West Africa. The ICCO's Nardella noted that "while production in Africa has decreased, it remained constant in Asia and Oceania and increased in Latin America."

Some farmers in India, which currently account for just 1% of the world's cocoa bean output, say they see the shortages as an opportunity. And while production in Indonesia, the world's third-largest cocoa producer, peaked in 2010, the government is trying to rejuvenate the sector by subsidizing tree replanting programs. From January to October, Indonesia's cocoa exports doubled year-on-year, reaching $2 billion, according to the Jakarta Post.

"Farmers in other parts of the world are already responding," Wateridge, a highly-respected expert on cocoa, told DW. "This year we expect to see record production in Ecuador, Peru, Cameroon, Nigeria, Democratic Republic of Congo, and Uganda."

But even if they commit large swathes of new land to planting cocoa trees, they typically take four years to mature, so may not help ease the current crisis.

Wateridge estimates a six to nine-month delay for the latest cocoa price spike to hit consumers, meaning next year's Christmas chocolate could be even more expensive.

"The two most important factors will be whether mid-crops deteriorate further and whether higher prices significantly impact consumption during the key consumption periods of Christmas, Valentine's and Easter," he told DW.

Edited by: Uwe Hessler